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Brookfield Infrastructure Partners L.P. Caps an Exceptional Year

The global infrastructure owner is building a big war chest to capture opportunities in 2018.

Brookfield Infrastructure Partners(NYSE:BIP) invested more than $2.7 billion last year to expand its platform of infrastructure businesses. Those new additions paid meaningful dividends by helping boost cash flow by double digits, which fueled market-crushing returns for investors. Those growth initiatives also enabled the company to increase its high-yielding payout by 8% for 2018, which was toward the high end of its 5% to 9% target range.

Brookfield Infrastructure Partners results: The raw numbers

What happened with Brookfield Infrastructure Partners this quarter?

A combination of acquisitions and organic expansions drove the quarter.

The utilities segment generated $172 million of FFO, rocketing 77.3% above the year-ago quarter thanks to the acquisition of a stake in a natural gas transmission business in Brazil from oil giant Petrobras(NYSE:PBR). Organic investments, especially in its U.K. distribution operations, as well as from upward inflationary adjustments, also bolstered the company.

FFO from the transportation segment rose 20.9% to $139 million thanks to higher volumes and tariffs across several of its businesses. The company reaped the rewards from acquiring toll roads and a port business in the past year, as well as from organic volume growth thanks primarily to increased traffic on its toll roads.

The energy segment's FFO climbed 7.7% to $56 million due mainly to a turnaround in the company's North American natural gas transmission business, which it co-owns with natural gas pipeline giant Kinder Morgan(NYSE:KMI). Brookfield and Kinder Morgan successfully paid down debt, thereby reducing interest expenses. In addition, the partners secured new contracts to lift volumes and earnings.

FFO from the communications infrastructure segment was $19 million, which was down $1 million from the year-ago period based entirely on foreign exchange fluctuations.

What management had to say

CEO Sam Pollock commented on the company's results, saying:

2017 was a strong year for Brookfield Infrastructure, completing a successful decade for the business. We posted solid financial results, acquired a large marquee utility, invested almost $1 billion across our various networks and strengthened our balance sheet. Upon completion of the sale of our Chilean electricity transmission operation, corporate liquidity is expected to be approximately $3 billion. We are well positioned to fund our organic growth project backlog and execute on several interesting new investment opportunities that we are currently pursuing.

Brookfield Infrastructure was busy last year. It closed the sale of a stake in Petrobras' natural gas pipeline business, which helped lead the way in driving FFO up 14% per unit. Brookfield got a great price on that business because Petrobras needed to sell assets to pare debt due to lower oil prices. To put the deal into perspective, Petrobras is currently trying to sell a smaller pipeline system in the northern part of the country for between $5 billion to $7 billion, while Brookfield and its partners only paid $5.2 billion for the larger southern system.

Meanwhile, that deal would have moved the needle on FFO per unit even more if the company didn't issue $1 billion equity during the year to sustain liquidity so it could capture new opportunities. However, with that cash, as well as what's coming from an upcoming asset sale, it has $3 billion at its disposal to fuel future growth.

Looking forward

Brookfield is already starting to put some of that cash to work. At the end of December, the company spent $30 million to acquire an 11% stake in the second largest natural gas distribution system in Colombia. It's working to buy more of that business in phases and could invest up to $170 million into it this year. In the meantime, after funding $900 million of organic growth projects last year, the company has another $1.3 billion in the backlog that it expects to finish over the next three years. Included in that is a $30 million investment it recently secured with Kinder Morgan to expand their pipeline joint venture, with the partners noting that they are working to secure up to $300 million of additional projects.

Matthew DiLallo owns shares of Brookfield Infrastructure Partners and Kinder Morgan and has the following options: short March 2018 $17 puts on Kinder Morgan. The Motley Fool owns shares of and recommends Kinder Morgan. The Motley Fool recommends Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.

Author

Matthew is a Senior Energy and Materials Specialist with The Motley Fool. He graduated from the Liberty University with a degree in Biblical Studies and a Masters of Business Administration. You can follow him on Twitter for the latest news and analysis of the energy and materials industries: Follow @matthewdilallo